Some Aspects of the Reserve Program

Abstract

AS THE discussion of the reserve features of the Federal old-age insurance program has progressed, it is coming more and more to be realized that the thinking which led to the adoption of the self-supporting reserve system in the firsf place is one of the major reasons why that program fails to embody some of the features essential to a sound, enduring, old-age security measure. The present setup relies so much upon the concepts of private life insurance that it is found wanting when judged by social insurance standards. On account of space limitations it will be possible to discuss only the contributory part of the old-age security program. Even though we are considering the reserve problem, it would be interesting and pertinent to discuss the free old-age assistance pensions provided by the law, their size in comparison with the old-age insurance benefits, and the methods of financing their probable heavy costs over the years. The contributory insurance plan applies, generally speaking, to those employed in commerce and industry, and is supported by pay-roll taxes, paid equally by employees and employers, starting in 1937 at 2 per cent of pay rolls and rising at three-year intervals to a maximum level of 6 per cent in 1949. The cost of the benefits will rise from relatively small figures to an estimated annual outlay of some $3,500,000,000 about forty years hence. Unfortunately there is accumulating evidence that this figure may have been underestimated, so that we must be prepared for still larger estimates as more adequate basic data become available. Toward meeting the old-age insurance payments there will be estimated receipts from the 6 per cent pay-roll taxes amounting to about $2,100,000,000 a year, so that some $1,400,000,000 a year will have to be provided from other